When a startup claims it is stealing business from Booking.com

BidRoom is the same as countless other startups in the travel industry when they claim to be disrupting bookings or solving travel planning, etc.

Many newbies coming into the sector often say they are the “Uber of X” or the “Airbnb of Y”, but very few go directly for a jugular of a rival, especially one that is hundreds of times bigger.

There is, of course, a difference between the ability to shout loudly with your marketing and actually doing something about it commercially, too.

In one of the more brazen tactics of the last few years, BidRoom claims it will be causing headaches for the likes of Booking.com and Expedia by “undercutting their prices and stealing away bookings”.

The Netherlands-based hotel booking service, which secured a €1 million funding round in June 2016 and operates on an almost negligible commission model, has come up with a process that it says eventually “take over” the online travel agency giant pair.

Fighting talk, of course, so how does believe this can be achieved?

Travellers that have already booked a room on any OTA (but Booking.com, Expedia and Hotels.com are those in its sights) can forward their confirmation email, and then as long as the booking had a free cancellation policy, BidRoom will secure it at a lower rate.

The traveller just has to cancel their existing reservation.

BidRoom then sends the consumer a link to its own platform where they can make a booking under the new rate.

An official says the process can take up to 72 hours to complete, depending on the speed in which the cancellation is made and the new rate negotiated.

“Usually we are able to send the new offers to the consumers on the same day they send us their original booking confirmations.

“Sometimes it’s ten minutes, but sometimes it can take two days or if the booking confirmation is sent to us on the weekend – up to 72 hours.

“The new offers that we send to the consumers are valid for 48 hours, and we promise that the rate won’t increase in that time.”

BidRoom claims the tactic has resulted in “hundreds” of rebookings being made via the service.

Shah

Mergim Kacija

The sustainability of such a business model depends on the willingness of the hotels to “accept” the BidRooms booking I’d imagine, so the OTAs have strong leverage to dissuade MOST of their hotels from doing so. There are, however, some hotels which the OTAs bend to such as high-occupancy, high ADR, luxury hotels which make the OTA selection stronger. They will take advantage of this loophole since their commissions are massive. If BidRooms can pass the legal test, the end result will be a tighter spread between the non-refundable and free-cancel rate to the point where BidRooms gets squeezed out of the equation.

Mergim Kacija

@BidRooms, might be smart to adapt the model and replace a free-cancel booking with a non-refundable instead. Offer the consumer 5% off of OTA non-refundable, take 5% for yourself and charge the hotel 10% commission. This guarantees revenue with a lower commission for the hotel and BidRooms has a more predictable cash-flow to build a business on.

1) this business model can make few bucks in the short term, but it is not scalable to become big – for many reasons: margins will be low, hotels will not participate due price parity issues, it is not automatable, etc
2) fundamentally speaking, any OTA/intermediary/marketplace business model HAS to provide long-term value to both the travellers and the hotels, otherwise it can not grow. As Philip mentioned this model does not provide such value – at least to hotels

Philipp

Long term this is not helping the hotel and only results in less profitability which is also easily traceable for the hotel. If they see the re-bookings coming at lower costs, this will likely result in close outs as it always happens when wholesale rates are fed to direct clients at scale.
The automation can be only achieved with channel managed hotels which is only a small share of hotels.
Maybe they manage to survive but its a jump in the red ocean as there is no innovation and no new market added.
Good Luck

Interesting business model that will have challenges with scaling and profitability. However I would suggest one of the main risks is that you actually start to register on booking.com sights due to the amount of cancellations they get. A quick change to the T&C of their contracts with the hotels with regards the amount of cancelled bookings per month and you will have a major headache at worst or long drawn out expensive legal battles at worst

Good luck to bidroom! Don’t listen to naysayers 🙂
It’s nice to see something different on the market, and every company had to start from small beginnings.

I’m assuming how it works is that you take a lower commission on the same rate already sold, giving back that discount to the guest. You’ll obviously need hotels who are willing to play the game to reduce their dependence on the large OTA, or your take in commission is so low that even the hotel gets more revenue back.
If you are a super low commission model, good luck making the business as seamless as possible in terms of ARI feeds and booking delivery.

Valyn Perini

Bart @ Bidroom

Hello Valyn. It’s profitable for the hotels to participate, because they can save money on each of those re-bookings. We don’t charge any commission, so it’s better for the hotels to get a commission-free booking with a minimum of 5% discount, than to get a booking from one of the major OTAs.

Well, is not so hard to steal clients from booking.com if they have 1.000.000 bookings a day.
Q :
Is this marginal or serious for booking?
How many bookings bidroom does a month?
How many clients wish to wait 72h, download, etc to get few euro discount?
Is this process manual or automated?
How this can scale?
Wish you the best Michael & Team!

Bart @ Bidroom

Hey Filip, thanks for the best wishes!

I can’t really go in-detail with the stats, but when it comes to the process, I’d call it semi-automated, as it depends on some factors, like whether the particular hotel is already on our platform, or whether the hotel uses a channel manager. Sometimes an in-between manual process is required, but often it’s automatic and the new, better offers can be sent to the guests in just a few minutes.

Semi-automated platforms with benefit of human touch and speed of OTA look very promissing for travel industry.
As Nicloas mentioned is tricky to say “I`m the cheapest” cose you need to already agrue on this.
Beside gigants can go dumping and kill value proposition of innovative startup.

If i learnt something at managing VeryLastRoom, a last-minute hotel booking app for several years and continue to do it… it is :
“It’s fucking expensive to tell people than you’re the cheapest !”. ^^

You know why ?
because everybody says that they’re the cheapest ! 🙂

So in consumer minds, it is just noise… it has so little impact , that marketing is outrageously expensive. And if you add to this, the fact that customer LTV in travel is low… as people don’t take enough vacations in their life (myself included)… 🙂 … Plus the fact that, as they take not enough vacations, you have to remind them to use your service (big costs of re-engagement) … your chances to develop a sustainable business model at scale become very thin.

Big B won’t bother with BidRoom if the Triptease ordeal taught us anything – they will slam the hotels. Make an example of a few, get BidRoom starved of inventory at source. Interested how the investors thought this could work – this a new proxy in another war?

Bart @ Bidroom

Competing on Google is not Bidroom’s battle to fight. Contrary to some other booking platforms, Bidroom does not try to hijack the hotel’s brand, instead the platform promotes the hotels, for example through its Social Media channels and newsletters.

Kevin May

Bart @ Bidroom

Sure, but I was only talking about promoting the hotels that sign up to Bidroom.com. This is an extra thing that we can do for them. Social Media and Newsletters surely aren’t the only channels we promote our own platform through. We have a growing Marketing team whose objective is to put Bidroom on the map of the biggest hotel booking platforms. We’re getting there.

As you can read there is a benefit for the user and hotel. I can also confirm that we will not start to charge a commission, so we will not turn into a “monster”. We are the good guys! By the way, your colleague Remko likes us! 😉

Kalpesh

That’s correct . Hotel have not learn anything for any of past mistake. This is not good practice from bidroom. they have one good model of lower commission and guarantee lower rate to certain % so why they want some one to cancel and rebook again . I don’t under stand the logic and also should not do this type of practice . it is not good

It’s better for the hotels to get a new booking coming from Bidroom instead of getting one from other OTAs, because they can save commission money, as Bidroom doesn’t charge any commission.

Also, re-booking with Bidroom is just an additional feature, not a replacement of our booking platform. The business model remains unchanged, and consumers can still save at least 5% on each booking when making a reservation on the platform.

If you don’t take commission – just like Trip Advisor didn’t used to…. then what is your revenue model both now and how will it scale to be a more attractive revenue source in the future than the current commission levels gained by the big OTA’s? … cos if it isnt better then future stakeholders and funders will have a hard time justifying a ‘moral’ position on commission and just as Google went from ‘ do no evil’ to max the shit out of everything at all costs so will this platform. That all said.. I do think its an interesting idea .. does it have enough funding to give it a long enough runway ?